Trump says the US military is “locked and
loaded”. In Guam, they are telling the schoolkids to duck and cover.
China published an editorial in a state-run newspaper, basically saying
that the first one to throw a punch loses. If North Korea launches a
missile first, threatening U.S. territories and triggering retaliation,
China will remain neutral.

A pre-emptive strike against Pyongyang,
however, would provoke a Chinese response and they would counter
reunification of the peninsula. Russian Foreign Minister Sergei Lavrov
said “Unfortunately, the rhetoric in Washington and Pyongyang is now
starting to go over the top. We still hope and believe that common sense
will prevail.”

Wall Street is betting nothing will happen, which is a
smart bet in an otherwise insane news cycle. Fire and Fury. Locked and
Loaded. Duck and cover. Dumb and Dumber… It’s been a long week.

And, if nobody does something incredibly stupid, we get back to business as usual, sort of. 200 S&P 500 components,
or 40 percent, are in correction territory. A stock or an asset class
enters a correction when it falls at least 10 percent from its 52-week
high. Among the stocks in a correction were e-commerce
giant Amazon.com, Goldman Sachs, Exxon Mobil, Starbucks and Netflix.

After a calm and pleasant summer, we can probably expect more
volatility. August is when traders take vacation and drama hits the
markets. September and October are typically volatile months; and
typically trade lower. The past may be prologue or irrelevant, which is
what makes stock markets so interesting.

Traders are digesting second
quarter earnings and trying to decide if recent record highs are
justified. In Washington, the politicians will pull up their socks and
get to work on the debt ceiling, plus tax reform at some point, and
maybe eventually infrastructure, and there is still work to do on
healthcare – repeal has failed, so now they need to fix what they have.

Meanwhile the Fed wants to normalize and tighten, which sends shivers
down the jellied spines of Wall Street traders. So, there is still
plenty of stuff that could blow up. For individual investors, the key is
now and will remain – discipline.

You wouldn’t know it from today, but it’s been just about the worst
week all year. For the week, the S&P fell 1.4 percent and the Dow
lost 1.1 percent – their largest weekly drops since the week ending
March 24 – the Nasdaq was off 1.5 percent and the Russell 2000 index
lost 2.7% for the week.

European stocks fell and U.S. junk bonds had the
biggest drop since March. Nearly $1 trillion has been wiped out from
global equity markets since Trump’s vow on Tuesday to unleash “fire and
fury” on North Korea if it threatens the United States.

The VIX briefly
topped 16.

Consumer prices
remained soft for the fifth straight month in July. The consumer price
index rose a seasonally adjusted 0.1% in July. Food prices rose 0.2% in
July while energy prices slipped 0.1%.

The core CPI, which excludes
volatile food and energy costs, also rose 0.1%. Consumer prices have
risen an unadjusted 1.7% over the past 12 months, up slightly from 1.6%
in June.

But on a core basis, which is watched more closely by Fed
officials, consumer prices remained at a 1.7% annual rate, the same rate
as in May and June. The core rate was held down by a sharp decline in
new vehicle prices, which fell 0.5%, the biggest decline since August
2009.

The cost of cell phones continued to decline, falling 0.3%. The
index of used cars fell 0.5%, its seventh consecutive decline. The price
of a car may be lower but the rent is still too damn high.

The cost of rent was up 3.8% compared to a year ago, according to the
Labor Department. That’s down a tick from the 3.9% annual pace it
notched in June. And it’s not as high as the 4.3% annual pace it
averaged in the year before the Great Recession started.

It’s not just
renters who are feeling the squeeze. The inflation category called
“Owner’s equivalent rent,” which tries to quantify how much homeowners
would pay for their housing if they rented it, was 3.2% higher in July
than a year ago. Still, it’s growing a lot faster than wages.

Muted inflation in the July consumer price data is not something the
Federal Reserve is going to be happy to see. But the central bank will
have four more reports to review before it needs to decide late year
whether to raise short-term interest rates again, as had been
previously projected.

Shares of Snap ended down 14 percent after hitting another record low
following a miss on revenue and daily active users. At least 12
brokerages cut their price targets on the stock. Valuation is
disappearing faster than its messages.

Blue Apron’s stock “performance” makes one wonder why the company
ever wanted to go public and why anyone agreed to underwrite it. The
recipe-in-a-box startup failed to show adequate signs of life in its
first quarter and even reported a very nettlesome operations problem.

Shares of APRN have fallen as far as 20% since the results came out
yesterday morning and now even Blue Apron’s underwriters are admitting that
they might have missed something during the IPO journey. Goldman Sachs
led the underwriting and they just downgraded the stock. Maybe they can
their free Blue Apron subscription to order crow.

Starbucks is now facing some serious competition. From other Starbucks.
The old joke about a Starbucks on every corner may be coming true. The
coffee chain’s relentless pursuit of ubiquity is becoming one of its own
foils, according to analysts at BMO Capital Markets, saying the company
has saturated the American market so much that it’s now losing sales
competing with itself.

Market watchers have an all-too appropriate term
for this phenomenon: cannibalization. On average, for every one
Starbucks location in the US, there are now about four others within a
one-mile radius to compete against. Over all in 2017, more than 62% of
Starbucks now compete with at least one other Starbucks coffeeshop.

More than 100 Applebee’s locations and around 20 IHOPs will shutter
this year. DineEquity, the parent company of both brands, is focusing on
shuttering under-performing locations. An earnings report released
yesterday shows sales fell by more than six percent at Applebee’s and
nearly three percent at IHOP in the last quarter; meanwhile,
DineEquity’s stock has lost almost half its value this year.

Diners
these days tend to go either high, spending money on special,
fine-dining experiences, or low, eating at cheaper fast-casual chains,
meaning places in the middle are feeling the squeeze. These kinds of
chains tend to suffer from bloated menus that try to do everything at
once, versus the currently-booming specialty fast-casual spots that
focus on doing one or two things and doing them well.

J.C. Penney finished down 16.6 percent after hitting a record low
following the retailer’s bigger-than-expected quarterly loss. Its 1.3%
drop in same-store sales was slightly worse than anticipated, and it
lost $62 million in the quarter. The company has been trying to refocus its business more on home appliances and services and less on apparel, but the efforts evidently haven’t paid off.

Department stores
almost across the board are in a period of turmoil as they battle the
rise of e-commerce, especially Amazon. and in any case, are contending
with shoppers who are heading out to malls and stores less often—and
usually looking for deep discounts whenever they do. Many chains have
announced widespread store closures, and even more may be necessary to
get their businesses to the right size for the current era.

President Trump just got a nasty review of his immigration plans from
the alma mater he loves to tout. A new study from the University of
Pennsylvania’s Wharton business school found that the proposals he backs
would dent growth and cost over 1 million jobs over 10 years.

The
president has strongly endorsed a bill introduced by US Sens. Tom Cotton
and David Perdue called the Raise Act, which adds to the president’s
campaign promise to focus on illegal immigration by going after legal
immigrants as well. Its proponents say they want to welcome only “good”
immigrants — those with a lot of money and high levels of education.

But
the Wharton report finds that the legislation, which is supposedly
aimed at boosting economic growth and creating more American jobs, would actually have the opposite effect.
According to the Wharton model, the Raise Act would reduce GDP by 0.7%
and reduce jobs by 1.3 million, over the next 10 years. The estimates
suggest nearly 100,000 jobs would be lost in the first year alone.

Vegetable prices may be going up soon, as a shortage of migrant
workers is resulting in lost crops in California. Farmers say they’re having trouble hiring
enough people to work during harvest season, causing some crops to rot
before they can be picked. Already, the situation has triggered losses
of more than $13 million in two California counties alone.

It’s unclear
exactly how widespread the labor shortage is for farmers throughout the
country, which would have a bigger impact on prices consumers pay.
Ultimately, drought and flooding have a more significant impact on
farms.

Low oil prices could also offset any impact of the worker
shortage. But for farmers, who have seen net farm income fall 50% since
2013, any lost income could be potentially devastating.

Disclaimer: The material appearing on this site is based on data and information from sources we believe to be accurate and reliable. However, the material is not guaranteed as to accuracy nor does it purport to be complete. Opinions and projections, both our own and those of others, reflect views as of dates indicated and are subject to change without notice. The contributions and opinions of others do not necessarily reflect the views of Marvin Clark, Monsoon Wealth Management, or Fixed Income Daily. Nothing appearing on this site should be considered a recommendation to buy or to sell any security or related financial instrument. Investors should discuss any investment with their personal investment counsel. Past performance does not guarantee future results.